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WHAT: Federal Reserve Bank of New York Empire State Manufacturing Survey Index, February WHEN: Wednesday, 0830 EST (1330 GMT) FORECASTS Reuters IFR Previous ESMS index 15.00 16.00 13.48 IFR COMMENTARY: "The Empire State Manufacturing Survey will likely see just a bit of improvement in its February reading, rising from +13.48 to about +16.00. Forward-looking indicators in the January report looked fairly nice, with the new orders index rising from +5.99 to +13.70, while the future activity index rose from +45.61 to a very healthy +54.87. "The New York Fed's reading has only relatively recently emerged from five months (June to October) of indicating contraction, and still hasn't recovered to the growth levels it indicated early last year. But growth in the manufacturing sector as a whole appears to be slowly gathering strength, with January seeing the sector add an outsized 50k to payrolls, and that should be reflected in most if not all the regional Fed surveys. "The New York reading might not accelerate as quickly as some of the others, however, given that sentiment as per the Empire State Survey already appeared to be higher than that recorded by most other surveys." ----------------- WHAT: Federal Reserve Industrial Production, January WHEN: Wednesday, 0915 EST (1415 GMT) FORECASTS (pct) Reuters IFR Previous Industrial production +0.7 +0.8 +0.4 Capacity use rate 78.6 78.6 78.1 IFR COMMENTARY: "Industrial production looks set to have its best reading in six months, with manufacturing output driving the headline index up 0.8%. If accurate, that would send capacity utilization up from 78.1% to about 78.6%, which would be the highest since July 2008. Though that would not yet be back to the long-run average of roughly 81%, it would be creeping closer to the point at which factories would have to begin investing more heavily in capacity in order to increase output. "According to data from the employment report, the sector's aggregate hours worked by all workers rose 1.2% in January, the most in data going back through 2006. Nonsupervisory employee hours were up 1.3%, the highest since March 2010. Correspondingly, we look for factory output to be up 1.1%, which would be the biggest jump since May 2010. Coming on the heels of December's 0.9% rise, it appears as though growth may be returning to early-recovery rates. "A fourth consecutive month of particularly mild weather (by some measures, the mildest yet) will likely see utility output shrink for a sixth month in a row. That will likely be partially offset by a modest increase in mining production." ----------------- WHAT: National Association of Home Builders Housing Market Index, February WHEN: Wednesday, 1000 EST (1500 GMT) FORECASTS Reuters IFR Previous HMI 26 25 25 IFR COMMENTARY: "We look for the NAHB Housing Market Index to hold at 25 in February, with availability of credit remaining a serious constraint on new home sales, largely frustrating what appears to be a recent surge in demand. Still, a pause at 25 or very close to it would mark a consolidation of impressive gains: The NAHB series has moved up 11 points over the last four months, bringing it to its highest reading since June 2007 -- even beating out months in 2009 and 2010 when sales spiked due to homebuyer tax credits. "And yet, the new home sales series has remained surprisingly moribund. A clue may come from the NAR's existing home sales data, which notes that a third of signed contracts for existing homes in recent months have failed to close, likely due to failures to obtain mortgages or low appraisals. Indeed, mortgage purchase applications have been holding at extremely low levels over the last year and a half, with little sign that lenders have eased standards. "We expect that the reality of continued low sales will temper growth in the HMI. Still, homebuilders do appear to be seeing more traffic, and undoubtedly are savoring the sight of falling existing home inventories, which in December fell to the lowest level since March 2005. Thus their expectations for the future will likely remain optimistic relative to the last few years." ----------------- WHAT: Federal Open Market Committee minutes from Jan. 24-25 meeting WHEN: Wednesday, 1400 EST (1900 GMT) NO FORECASTS IFR COMMENTARY: "The minutes from the January 24-25 FOMC meeting could contain some interesting insights as to whether the FOMC expects to implement QE3 at some point in 2012. Given the tone of the January 25 statement, projecting an exceptionally low fed funds rate through late 2014, a dovish tone to the minutes looks guaranteed. While the Fed has revealed more on the outlook than ever before by publishing for the first time its projections on the fed funds rate, the January 25 statement contained no projections on the size of the balance sheet. Bernanke in his post-meeting press conference stated that the minutes would provide additional qualitative information about participants' views of the balance sheet going forward. The minutes are likely to show several expecting a need for QE3 under the FOMC's subdued growth and inflation projections, though the views of the hawks, and not just of Lacker, the only hawk with a vote this year, will also be detailed. Talk over QE3 could be the highlight of the minutes, though dovish sentiment should also be conveyed from participants noting a slowing in many indicators in late 2011, notably consumer spending and business investment, and risks for 2012 from Europe and fiscal tightening. Some may feel that dovish sentiment conveyed in the minutes may already be dated given improved data released since the meeting, and it certainly is true that any case for QE3 has become harder to make. However, the majority at the Fed are unlikely to change their tone quickly, and should the data start to falter,QE3 could be back on the table."